So far this month, bonds have bounced up and down like a yo-yo.
Between last Monday and Wednesday, yields on the 30-Year Treasury Bond moved sharply higher, past 3.1%.
On news that Greece’s debt reckoning has been delayed until the end of the month, yields on the Treasury dropped, falling below 3.05%.
Then, after Friday’s jobs report, higher again. And today, yet another spike higher. See for yourself…
The news out of Europe is that Greece has deferred payment until June 30.
Instead of paying €300 million last Friday, they’ve decided to bundle all of June’s four payments into a total of €1.6 billion due at the end of the month. I doubt they’ll be able to pay that heftier sum, so I think it’s safe to say the country has pretty much defaulted!
On the employment front, the Bureau of Labor Statistics (BLS) report beat expectations, making the odds of a rate hike more likely.
Non-farm payrolls increased by 280,000, when 220,000 was the expected figure. The participation rate increased to 62.9%, when it was expected to decrease to 62.7%. Finally, hourly earnings moved higher by 0.3%, 0.1% higher than expected. The only negative was the unemployment rate which increased to 5.5%, but even that was due to an increase in the participation rate.
With the Fed meeting beginning a week from today, I believe we’ll see continued volatility up until then. The likelihood of a rate hike is now higher given the positive wage growth and apparent stability in prices, seen in both producer and consumer prices last month.
I still believe a rate hike will happen sooner than later. Harry believes we won’t see a rate hike until much later in the year, if at all in 2015. Our shared opinion of the economy’s health does suggest the Fed can’t and even shouldn’t raise rates — I simply think they’ve backed themselves into a corner, and that at this point, they have no choice.
Time will tell.
Editor, Dent Digest Trader